The effects of Covid-19 pandemic on the volatilities of the dynamics of bitcoin and gold

The emergence of the health crisis, covid-19 in this advanced technological era where connections between markets, nations and economies have grown stronger than ever before, both the physical and digital financial markets were affected by the shock of the covid-19 pandemic rapidly. The Chinese financial market experienced the first consequences of the covid-19 pandemic, the shocks in the Chinese stock markets spill over to the other financial markets like bitcoin, gold and others in the world. This thesis focuses on impact the covid-19 has on volatilities of the dynamics of bitcoin in the cryptocurrency market and gold in the precious metals market. Gold has an online platform as well as bitcoin where both assets can be traded online worldwide, however gold has a physical form as it is mined physically and also used in many physical ways too whereas bitcoin has no physical form as it is digitally generated and cannot be used in any physical form, this paper argues that these similarities and differences between these financial assets play major roles in how the covid-19 crisis affected their respective markets. The research employs the GARCH model by using ARMA as the mean equation and examines the impact the health crisis Covid-19 has on the volatilities of the price returns and volumes returns of bitcoin and gold using daily data of bitcoin prices and volumes, gold prices and volumes from 9/22/2014 to 3/31/2021.The empirical results of the estimation gives evidence that covid-19 impacted the volatilities both bitcoin and gold price returns to be more volatile, however the pandemic has no significant impact on the mean values of bitcoin and gold price returns, moreover, the covid-19 restricted the movement of people all over the world, mining, transportation and physical usage of gold was affected unlike for bitcoin where is produced and traded digitally only, the results of this thesis also verifies that the covid-19 has effects on both the mean values and the volatilities of the gold volumes but has no effect on both the mean values and volatilities of the bitcoin volumes.